The Federation of Free Farmers (FFF) said the money that goes to Philippine Crop Insurance Corporation (PCIC) are government contributions to the premiums for crop insurance policies issued to farmers and not subsidies.
FFF issued this clarification on efforts to to debunk claims that the government has been heavily subsidizing the PCIC, following a statement by the Department of Finance that the government had extended P23.3 billion in subsidies to the agency over the last 20 years.
DOF further said that “this trend is not sustainable” and cited the need to stem the “financial hemorrhage” of the corporation.
“The PCIC charges a premium to cover expected claims from farmers arising from crop losses. This premium is divided among the parties who have an insurable interest’ or stake in the insurance policy – the farmer who stands to lose his crop, the lending bank which may be unable to collect from the farmer, and the government which is duty-bound to help farmers recover in order to sustain the country’s food supply,” said FFF National Manager Raul Montemayor.
“The government’s so-called subsidies are actually payments for its share in the total premium,” he added.
Montemayor said that fund transfers to PCIC increased in recent years due to the government’s decision to fully cover the premiums for marginal and non-borrowing farmers and to expand the program’s coverage to other sectors like livestock, which were affected by the African Swine Fever (ASF) disease.
Supplemental funding came from mandatory allotments under specific laws, such as the Agri-Agra Law, and from budgetary allocations from Congress.
Last September 14, upon the recommendation of the DOF, President Rodrigo Duterte issued Executive Order (EO) 148, transferring the PCIC from the Department of Agriculture (DA) to the DOF to ensure that “government assets and resources are used effectively.”
The FFF warned that removing government’s premium shares, as proposed by DOF, will result in higher premiums for farmers and discourage them from securing crop insurance. Banks in turn will find it too risky to lend to uninsured farmers.
“Under these conditions, private firms are unlikely to enter the crop insurance business. Moreover, almost all crop insurance programs in the world are directly or indirectly supported by governments due to the inherent risks in agriculture,” Montemayor said.
Regarding PCICs alleged losses, the FFF noted that the corporation is actually financially stable and generates extra earnings from investments to cover its overhead. The agency is also protected from extraordinarily large claims through reinsurance.
The FFF said further that DOF’s proposal to expand insurance coverage to other crops, livestock and farm assets has already been implemented by PCIC.
It said that notably, the PCIC was adjudged as the top government-owned and/or controlled corporation for the past four years and has been remitting dividends to the government from its net income from operations.